Anti-AGIA Bill

By Dave Donaldson

The House Finance committee today onMonday opened hearings on a bill that could lead to the abandonment of the AGIA natural gas pipeline from the North Slope to North American markets.  TransCanada Pipeline was awarded the state license to put the project together.

From a legislator’s  viewpoint, problems with the AGIA pipeline arose out of the absence of any public disclosure of the results of last year’s first marketing offer – called an open season.  The bill sets a deadline for the administration to determine whether the project is still economically viable.  And licensee TransCanada anticipated having some results in December. There was no legal requirement for that timeframe.   The measure’s sponsor is House Speaker Mike Chenault, however,  says the public anticipated knowing those open season results before the session began in January.

The Global economic framework AGIA was built on may no longer exist.  And that may make AGIA an uneconomic project.  And if it is,  Mr. Chairman,  Alaska needs to know.

Chenault told the Finance Committee that if there is a problem with the AGIA-enabled gas line,  the legislature needs to begin looking at its options as quickly as possible.

AGIA supporters say the bill is premature legislation.   Anchorage Democrat Les Gara says TransCanada has done nothing wrong under the terms of either the AGIA statute or the license issued by the state.

(GARA) The worst thing we can do is breach a contract on the biggest project on the state’s future.   I think if we do at this time, we’ll never have a gas line in the state.   And walking away from a contract where one party has met all its obligations is going to do nothing but give us a black eye.  (CHENAULT)  Representative Gara, this does not breach the contract.  In fact, in our opinion, it makes the administration come back to the legislature and tell us this is an economical project.

Gara argues there are two ways of looking at the bill.  Either it is a breach of contract that adds new material to the project – or it does nothing and doesn’t need to be passed.

TransCanada, however, sees the bill as an affront.  Tony Palmer, the company’s vice president who has been managing the Alaska operations for the company since the first talk of AGIA appeared,  says the bill violates his company’s licensing agreement.   It changes the rules.

It raises uncertainty for state support of AGIA at a critical time.  We are in negotiations with potential customers.  We are continuing those negotiations.  And it undercuts the efforts to achieve alignment of all parties necessary for a successful project.

Palmer warned that the bill – if it passes – has the effect of adding definitions and timelines that are not in the original gas line law.    And that would serve as a warning for future companies that might consider working with the state – he describes a lack of certainty.

The Realpolitik of Alaska, and for any party proposing a project in Alaska, for any party looking for certainty on a contract between yourselves and a third party, will look at this piece of legislation as potentially affecting their future.

The bill’s future is uncertain at this point.   It was only referred to the finance committee — and if it is heard elsewhere, it will be on the floor of the House.   The senate has shown no interest in the measure.


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